The formula
Utilization = billable hours / available hours. Billable hours are hours charged to client projects. The choice of denominator matters more than most firms realize, so define it once and use it everywhere.
- Gross basis: all paid hours, typically 40 hours x 52 weeks = 2,080 a year for a full-time person.
- Net basis: paid hours minus holidays and paid time off, which counts only hours the person could actually have worked.
Worked example
A full-time engineer has 2,080 paid hours, 80 hours of holidays, and 120 hours of paid time off. Available hours on a net basis are 2,080 - 80 - 120 = 1,880. The engineer logged 1,410 billable hours.
- Net utilization: 1,410 / 1,880 = 75.0 percent.
- Gross utilization: 1,410 / 2,080 = 67.8 percent.
- Same person, same year, two numbers. Comparing one person on a net basis with another on a gross basis is meaningless.
Why targets differ by role
A single firm-wide target punishes the people whose job includes unbillable work. Principals win the work, manage clients, and run the firm. Project managers carry coordination that is often only partly billable. Production staff should spend most of their time on project work. Administrative staff are usually not expected to bill at all.
Set a target per role, based on what that role is expected to do with the rest of its time. Then the firm-wide figure follows from the mix of people.
Worked example: a blended firm target
Take a hypothetical ten-person firm where everyone has 1,880 available hours, and where the firm has chosen these targets for itself: two principals at 50 percent, six technical staff at 85 percent, and two administrative staff at 0 percent.
- Principals: 2 x 1,880 x 50% = 1,880 billable hours.
- Technical staff: 6 x 1,880 x 85% = 9,588 billable hours.
- Administrative staff: 0 billable hours.
- Firm total: 1,880 + 9,588 = 11,468 billable hours out of 10 x 1,880 = 18,800 available, or 61.0 percent.
- If one principal's utilization rises to 70 percent at the expense of business development, the firm figure improves this year and backlog may suffer next year.
Using utilization well
Utilization measures how time is spent, not whether it was profitable. Pair it with realization: billable hours that are written down still count toward utilization but produce no revenue.
- Review it monthly and on a rolling twelve-month basis; one month is noisy.
- Look at it alongside backlog. Low utilization with thin backlog is a sales problem; low utilization with full backlog is a staffing or scheduling problem.
- Treat persistently very high utilization as a warning about burnout and missing time for training and review, not only as success.
Where Hubity fits
Hubity records time on timesheets against projects and tasks, in the same workspace as invoicing, so billable hours come from the time people actually log.